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The Impact Of Management Planning On The Demise Of Arthur Andersen

The Impact of Management Planning on the Demise of Arthur Andersen
The planning function of management is critical to the success of any organization. Innovative ideas, perfect products, and highly skilled employees fail to become assets if no plans are in place for how these assets will be used to achieve the organization’s goals. In the case of the once, highly successful accounting firm, Arthur Andersen, management’s failure to plan effectively for crises led to its demise.
Management Planning at Arthur Andersen
In today’s business environment, successful planning involves analyzing inside and outside factors that affect the organization. Strategic decisions should be guided by market knowledge with objectives that are open to change (Lamond, 2004). During a crisis, planning becomes even more important to an organization’s sustainability. For Arthur Andersen, strategic planning by management should have been implemented with regard to how the Enron crisis would affect organizational goals, a tactical plan to address the situation publicly and internally, an operational plan for conducting business during the crisis, and contingency planning to analyze every way possible to keep the organization from failing as a result of the crisis.
Crisis Management Planning
Legal issues, ethics, and corporate social responsibility all had major impacts on the planning by Arthur Andersen management during their times of trouble. According to James and Wooten (2005), organizational crises can be classified into two types: sudden (such as natural disasters, sabotage, hostile takeover, technology disruption) and smoldering (such as rumors/scandals, mismanagement, workplace safety, class action lawsuits). Because sudden crises are often seen as out of the control of people’s hands, the public is often sympathetic and understanding of a company’s reaction to this type of event. Smoldering crises, however, are perceived to be mostly the result of management failings and are...